Let's hope it's just a false alarm. The continuous escalation of Sino-US trade disputes is likely to subside again by the end of October.

On October 10-11, China-US tariff and trade negotiations progressed new changes, and can even be said to be a fluctuation: China implemented a series of trade and non-tariff measures against China, taking reciprocal countermeasures, among which the key initiative is the Ministry of Commerce in recent days in a row issued four export control ban, covering rare earth products, rare earth mining related equipment system and technology, rare earth processing auxiliary materials. In addition, graphics, diamond and other hard materials, lithium batteries, and even mature process semiconductor chips are also included in the scope of control. This means that the United States in the fields of military and even semiconductors, are facing China's export control review.

After China issued relevant policies, former US President Trump reacted fiercely. On October 11th, he announced that from November 1st, he would impose another 100% tariff on Chinese goods exported to the United States. If the tariff increase comes to fruition this time, China will inevitably take reciprocal countermeasures. Previous Sino-US tariff negotiations will waste all previous efforts, and the two sides may return to the tense state in early April-at that time, China and the United States almost fell into the deadlock of "decoupling and breaking the chain" in the field of tariff trade.

And after Trump announced the policy, the U.S. stock market reaction accelerated: before the announcement, the U.S. stock market fell by about 2%, with the Nasdaq index falling by about 2.5%, and the Nasdaq 500 index fell by 2%; after the announcement, the Nasdaq index fell to more than 3% and the Nasdaq 500 index fell by more than 2% and did not fall.

After-hours data showed that Nasdaq and S&P stock index futures fell further, falling 4% to 5%. Obviously, American investors do not approve of Trump's escalation of trade disputes with China (i.e. tariff war).

Why is there a high probability that China and the United States will resolve this dispute before the end of October?

The core reason is that the United States is currently unable to win a comprehensively escalated trade war with China.

If you understand the use of rare earths, it is not difficult to understand this: Previously, the United States, together with partners such as the Netherlands, Japan, South Korea and TSMC, implemented "long-arm jurisdiction" in the semiconductor field, uniformly setting up barriers and controls on the mainland of China's advanced process semiconductor products, equipment, software and materials; this time, China uses rare earths as a reciprocal countermeasure tool, and its scope of influence is far greater than the U.S. semiconductor control measures.

In the era of electrification, almost all scenes involving motor rotation are inseparable from rare earths: including the drive of electric locomotives, the operation of aircraft engines, the work of new energy vehicle motors, the rotation of wind turbines in the field of new energy, and even nuclear energy. Related equipment in the field all rely on rare earths.

In the military field, the currently hotly debated stealth fighter jets, laser-guided bombs, various radars and other equipment are also inseparable from rare earths; nuclear radiation inspection equipment in the aerospace and medical fields also needs rare earths support.

More importantly, although the United States seems to have the power of speech in the field of semiconductor chips, the production processing link of semiconductor chips is equally rare: the polishing link of advanced process chips requires rare earth, 5G communication, optical fiber communication signal amplifiers, also rely on rare earth.

Therefore, if China implements comprehensive rare earth export controls on the United States, many industrial fields in the United States may face the dilemma of "it is difficult for a clever woman to cook without rice"-this impact is far greater than the U.S. control on China in the semiconductor field. Understanding this, it is not difficult to understand why the United States cannot win an all-round escalating trade war with China.

In addition, the US stock market reaction mentioned in the opening, the essence is that the market voted for "real gold and silver", clearly opposed to Trump's escalation of the trade war with China. From the U.S. perspective, if it is determined to start a war, the losses will be very heavy; and from the Chinese perspective, rare-earth export counter-terrorism is only the reciprocal response to non-tariff barriers outside the U.S. tariffs, belongs to the "justified defense" initiative.

At present, whether China is focusing on domestic economic development or adhering to the national strategy of opening up to the outside world, it is subjectively unwilling to escalate a trade war with the United States-this will not only adversely affect China's scientific and technological progress and economic development, but may also impact the domestic capital market.

China has taken the above countermeasures and is more likely to accumulate code for negotiations during the APEC (Asia-Pacific OECD) summit in South Korea at the end of October: through the ¡°extreme pressure¡± strategy, the two sides create space for subsequent mutual concessions and consensus.

In summary, China is reluctant to escalate the dispute, and the United States is unable to win the trade war, combined with this large background, when the US dollar first negotiation in the middle of October, the rational probability will overcome the sensitivity, and the chances of both sides to settle the dispute are quite large.

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